|The end of the 10-month freeze led to the suspension of direct talks with Palestinians [AFP]
The US has offered Israel an incentive package to reinstate a 90-day moratorium on West Bank settlement building, in an effort to revive stalled peace talks with the Palestinians, diplomatic sources said.
The proposed moratorium, which would not include building in occupied East Jerusalem, was discussed in Israel's weekly cabinet meeting on Sunday, but Binyamin Netanyahu, the prime minister, said final details of the plan were still being worked out.
"It is not yet final, it is still being formulated by our team and that of the Americans. If and when the proposal is completed, I shall bring it to the appropriate government forum, in this case, the security cabinet," Netanyahu told reporters before the meeting.
"Every proposal will consider the security needs of the state of Israel, both immediate needs and threats in the coming decade," he said.
The potential freeze would cover future construction as well as works that were undertaken since September 26 when the previous 10-month government moratorium expired, sources said.
The US promised Israel it would not ask for an additional settlement freeze after the 90-day period and that they would back up the proposed moratorium with security measures, the sources said.
"We know the US has been pushing Israel to extend that moratorium. We are hearing the incentives include security arrangements that could include 20 fighter jets that the US would supply to Israel," Sherine Tadros, Al Jazeera's correspondent in the West Bank, said.
"Israel also wants guarantees from the US that it would veto resolutions being brought to the UN [that are not in their favour]. Such as the Goldstone report on Israel's war on Gaza, which was very critical of Israel and Hamas and accused them of crimes against humanity.
"And another UN resolution on Israel's deadly raid on the Gaza bound aid flotilla on 31 May. We don't have confirmation from the US side that this is what they are offering."
Khaled Elgindy, an adviser to the Palestinian leadership on negotiations with Israel in 2007, said that the settlements issue had been a "nuisance" to US efforts to bring Israeli and Palestinian officials to the table.
"The plan of the administration for the past year has been to get an agreement on borders and security so as to obviate the need for a settlement freeze," he told Al Jazeera.
"They undrestand that genuine talks cannot continue while their is settlement activity, it undermines the process."
Israel insists the issue of settlements will become null and void once final borders are agreed upon.
Saeb Erekat, the chief Palestinian negotiator, said the Palestinian Authority had not been informed about the proposed US deal.
"Until yesterday we had contacts with the US administration but it did not update us about the incentives package," he told Al Jazeera.
"The first issue is that the exception of Jerusalem is forbidden and does not make sense for the establishment of an independent state without East Jerusalem as its capital."
The Palestinians have previously said they will not resume peace negotiationsuntil Israel stops building in the West Bank and East Jerusalem - territory they claim as parts of their future state.
Members of Netanyahu's coalition government were opposed to extending the 10-month "freeze", leading to the suspension of direct peace talks with the Palestinians.
It was not clear if they would support the latest attempts to extend the moratorium.
Netanyahu convened a meeting of his inner cabinet on Saturday night to brief them on his meetings with Hillary Clinton, the US secretary of state, and other US officials last week.
Meanwhile, an Israeli settllement watchdog said on Sunday that settlers had begun work on 1,649 homes in the West Bank since the 10-month moratorium was lifted.
"It turns out that the settlement freeze was no more than a 10-month delay in the construction and the settlers managed to fill in the gap very fast," Peace Now said.
"The government of Israel must renew the freeze in a way that will stop all settlement activity, including the projects that started in the last few weeks, until there is a final agreement between the Palestinians and Israel regarding the borders and the future of the settlements."
Figures in the Peace Now report show the building work was carried out in 63 settlements and, in more than two-thirds of cases, settlers had begun laying the foundations of their new homes.
During 2009, construction work began on 1,888 new housing units, the report said, citing data from Israel's Central Bureau of Statistics.